Google just accused Uber of creating a fake, shell company with its former engineer to steal its tech

SAN FRANCISCO — Google accused rival Uber of plotting a devious
"cover-up scheme" with a former Google engineer to steal crucial
self-driving-car technology, a bombshell claim that turned up the
heat in what has become Silicon Valley's most
high-profile legal battle in years.

In a court hearing here on Wednesday, Google's attorneys sought
to portray Otto, the startup company founded by the former
engineer, as nothing more than a front company designed to help
Uber catch up in the highly competitive self-driving-car field.

Uber acquired Otto in August, but according to Google's lawyers,
Otto was never meant to operate as a real business. Anthony
Levandowski, the engineer who left Google and founded Otto,
planned all along to go to Uber, Google alleged. In fact, Uber
gave Levandowski $250 million in stock the day after he quit
Google in January 2016, lawyers said in court. (An Uber
representative later told reporters that it was a document from
August and simply back-dated for time served.)

"Through discovery, we've learned that Uber and Levandowski
created a cover-up scheme for what they were doing," said Charles
Verhoeven, an attorney for Waymo, Google's self-driving-car
spinoff. "They concocted a story for public consumption."

The hearing on Wednesday is the opening round of a legal battle
between two of Silicon Valley's tech superpowers, each trying to
establish supremacy in the nascent market for self-driving-car
technology.

At stake is a market that could one day be worth tens of billions
of dollars and upend everything from the automotive industry to
the fast-growing ride-hailing business that Uber has pioneered to
become the world's most valuable private tech company.

A lot of money and a brilliant guy

The allegation that Uber conspired to build a company before
acquiring it is a large part of Waymo's bid to stop Uber's
research on self-driving cars.

Waymo alleges that in 2015,
Levandowski downloaded more than 14,000 files — 9.7 gigabytes
of data — containing information about the company's
self-driving-car technology to his laptop and transferred those
files to an external storage device. Those files included plans
for Waymo's proprietary lidar system, according to the company.
Lidar is the key piece of technology in self-driving cars that
allows them to "see" what's ahead on the road.

His new company, Otto, was acquired by Uber more than six months
later.

Judge William Alsup pushed back on Waymo's claims and asked
whether Uber could be innocent. He said that maybe the "worst
thing they did is pay a lot of money to hire away a brilliant guy
from another competitor."

"Here's the thing," Alsup said. "You didn't sue him. You sued
Uber. So what if it turns out that Uber is totally innocent?"

While Waymo has accused Levandowski and Uber of being in cahoots,
it hasn't presented evidence that Uber knew that Levandowski had
downloaded the files or instructed him to do so.

Here's what Waymo says it has discovered so far:

October 2015 — An Uber engineer, Scott Boehmke, made a note
in his lidar journal about a discussion with Uber's Brian
McClendon. The two had talked about a "NewCo," the journal says.
The pros are "experience with automotive competitors" and cons
are no track record and no details.

January 2016 — Waymo says Uber was meeting with Levandowski
before he left Google. An email sent by McClendon says he's
preparing to meet with an "Anthony" the next day. Another email,
with a file called "NewCo Deliverables," said that "this list of
deliverables is a high bar for sure. But then again so is what he
is asking for in $$."

January 27, 2016 — Levandowski leaves Google with no notice.

January 28, 2016 — Waymo says Uber promises 5 million shares
of Uber stock vesting a day after he leaves in a "notice of
restricted stock award." (An Uber representative disputes the
characterization and told reporters during a court break that the
document was from August when the acquisition closed and
back-dated to include his time at Otto.) That amount is worth
more than $250 million, according to Waymo's attorneys. "The very
next day, he's getting awarded stock by Uber when he's supposedly
starting his own company, when he's supposedly building his own
technology, he's secretly working for Uber," Verhoeven said.

January 29, 2016 — Emails with Uber's attorneys that are
being withheld from Waymo are related to an "anticipation of
litigation" related to the acquisition of Ottomotto.

March 2016 — Uber says Waymo started contemplating suing
Levandowski.

April 11, 2016 — Uber and Levandowski enter into a joint
defense agreement.

August 18, 2016 — Uber announces the acquisition of Otto.

Uber's turn

In Uber's rebuttal, its attorney, Arturo Gonzalez, argued that
Boehmke's notebook entry was part of evaluating potential
third-party lidar companies. That could've included talking to
Levandowski in case he decided to set up a company.

The emails about Uber's concerns about potential litigation eight
months before it acquired the company were in response to a real
threat, Gonzalez said. Waymo started contemplating suing Uber in
March 2016, Uber said it learned during discovery.

While much of Waymo's arguments focus on its claims of the shell
corporation, Uber argues that its work isn't violating Waymo's
intellectual property and that there's no need for a preliminary
injunction because it's not a threat for the company to do so in
the immediate.

Uber even presented to Alsup the parts of Spider, a lidar device
that Waymo
accused Uber of hiding. It said it located the items in
storage closets and in the basement.

The arguments related to the lidar designs and misappropriation
of trade secrets happened behind closed doors. But Alsup said
Waymo still hadn't proved a direct link between any stolen files
and the products Uber was working on that would warrant a halt to
Uber's self-driving-car research. He's
expected to rule within the next week.

"I've already given you lots of time for discovery, and you
don't seem to have a smoking gun," Alsup said.